GOP-Backed Benefit Cuts Called Harmful to Small Businesses in NJ

Concerned that their voices are being ignored in Washington, D.C., New Jersey small-business owners and advocates spoke out yesterday against potential cuts to Social Security and Medicare.

The teleconference highlighted a white paper from the Main Street Alliance, which argued that even small cuts to the two programs could have disproportionately large effects on businesses still struggling to work their way out of the Great Recession.

“Even a 3 percent cut to Social Security and Medicare would mean an annual loss of more than $1 billion a year to New Jersey’s economy,” said Rep. Donald Payne Jr. (D-10th Dist.), who participated in the presentation.

The report’s release came in the wake of the budget cuts presented by Rep. Paul Ryan (R-WI) and adopted by the Republican-controlled House of Representatives. Participants acknowledged that is unlikely to become the nation’s spending plan.

But Corinne Horowitz of the New Jersey Main Street Alliance said her 1,300 small-business members also are worried about cuts or other changes sought by President Barack Obama as part of a so-called “grand bargain” with Republicans. They fear budget talks will continue with them still on the outside, she said.

“The small business voice is really important because we’re not hearing it in Washington, where corporate CEOs like the Business Roundtable,” whose members claim more than $7.3 trillion in annual revenues, “are the ones being listened to,” Horowitz said. "Maybe corporate CEOs don't need Society Security or Medicaid for their retirements, but small-business people rely on them."

According to the report, an analysis of U.S. Census data shows 36 percent of New Jersey small-business owners are 55 or older, she said. That is roughly on par with the national average, which has an overall rate of one-third, she said.

So not only do employees rely on government programs, but many of the people who own and run these companies also need them to remain stable, according to participants.

“We’ve put all of our savings into our business,” said Chris Bobbins, owner of the South Orange Frame Shop. “If Congress cuts Social Security and Medicare, I don’t know how I’ll be able to afford to retire.”

Even under the current tax-supported system, those benefits can be sparse. The average benefit of a Social Security beneficiary in New Jersey is $14,451 a year, but two out of three senior citizen households rely on the program for a majority of their income, Horowitz said.

“We need people to have disposable income that they can depend upon because that means customers for our businesses,” said Geetha Jayamaran, who owns two Flemington firms, Grab Em Snacks and the Spoon & Sprout Café.

That only increases in an era when small business continue to find it difficult to get financing from banks or government programs, she said. She started the café two years as an ancillary venture to her successful line of plantain chips, Jayamaran said.

“We needed a commercial kitchen for the chips because we were leasing space and it was very cumbersome,” but when she found a location, it was larger than necessary, she said. The vegetarian café seemed like a natural and fun sideline, but the workload is mounting, she said.

“Because I can’t get funding, I can’t hire all the people I could use, so I end up doing more and more myself, which isn’t healthy,” Jayamaran said, adding that is also limiting export of her chips.

“All these issues are on our front burner at once… so we don’t need anything that will reduce spending by our customers,” she said.

Jayamaran is right to link those issues to Social Security and Medicaid, Horowitz said, citing a November report from the Congressional Budget Office, which found that each dollar spent on the two programs generates about $1.50 in consumer spending.

Asked for other budgetary solutions, the advocates and small-business people had a familiar list of alternative prescriptions: close tax loopholes, eliminate the “parking” of corporate funds in offshore accounts, and make sure big businesses and wealthy individuals pay their “fair share.”

That is not just rhetoric, said Ann Vardeman of New Jersey Citizen Action. She pointed to a report earlier this month from Citizens for Tax Justice that analyzed the offshore profit holdings of 92 major corporations.

Her group highlighted the New Jersey findings, which found five in-state corporations -- Merck, Johnson & Johnson, Honeywell International, Cognizant Technology Solutions and Becton Dickinson -- currently have more than $100 billion in revenue deposited in untaxed off-shore accounts.

“For many of the companies on this list, these are revenues that were earned in this country, but they are able to use accounting moves to treat them as ‘foreign’ revenue,” Vardeman said.

Overall, Citizens for Tax Justice calculated that 92 companies will avoid $600 billion in federal taxes over the next decade -- and the figure is rising.

“So before Congress and the President cut programs that benefit small business people, they need a ‘Buffet Rule’ for corporations,” she said. “Just like (billionaire investor) Warren Buffet proposed a rule that CEOs pay at least the same tax rate as their secretaries, Congress should make sure big business pays at least as much as small business.”

Payne, who sits on the House's Small Business Committee, agreed that Congress should do more to protect the interests of such firms, arguing the current Republican approach “would end Medicare as we know it.”